Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/209813 
Year of Publication: 
2002
Series/Report no.: 
Working Paper No. 2002/14
Publisher: 
Norges Bank, Oslo
Abstract: 
Macroeconomists have for some time been aware that the New Keynesian Phillips curve, though highly popular in the literature, cannot explain the persistence observed in actual inflation. We argue that one of the more prominent alternative formulations, the Fuhrer and Moore (1995) relative contracting model, is highly problematic. Fuhrer and Moore (1995)'s formulation generates inflation persistence, but this is a consequence of their assuming that workers care about the past real wages of other workers. Making the more reasonable assumption that workers care about the current real wages of other workers, one obtains the standard formulation with no inflation persistence.
Subjects: 
New Keynesian Phillips curve
Fuhrer and Moore model
inflation persistence
JEL: 
E31
E3
E5
Persistent Identifier of the first edition: 
ISBN: 
82-7553-205-1
Creative Commons License: 
cc-by-nc-nd Logo
Document Type: 
Working Paper
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